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Softchoice Announces Third Quarter 2021 ResultsSoftchoice Corporation ("Softchoice (News - Alert)" or the "Company") (TSX: SFTC) today announced its financial results for the quarter ended September 30, 2021 ("Q3 2021"). The Company also reiterated its 2022 Outlook provided during its IPO. Unless otherwise noted, all dollar ($) amounts are in U.S. dollars. "Softchoice achieved strong third quarter organic growth including a 24% increase in our gross profit, our key top line measurement, driven by increasing customer consumption of cloud products," said Vince De Palma, Softchoice's President & CEO. "Our strategic focus in our hybrid multi-cloud, collaboration/digital workplace, and software asset management solutions, supported by significant investments we have made in our technical and sales enablement resources, cloud strategies and business transformation initiative Project Monarch, resulted in record salesforce productivity in Q3 and increased customer engagement, with net revenue retention over the last year rising to 108% and average gross profit per customer hitting record levels." "We recorded double digit growth in gross profit across all of our sales channels and greater than 20% growth in each of our Software & Cloud, Services and Hardware IT solutions, the latter despite the negative impact of ongoing hardware shortages globally on sales," added Bryan Rocco, Softchoice's Chief Financial Officer. "Our decline in Adjusted EBITDA was due to the impact of foreign exchange, as well as increased operating expenses from our ramp of sales-enablement investments to drive growth and certain non-recurring professional fees incurred to support the implementation of a new digital workflow platform for our managed services offering. Additionally, in Q3 2020, we received $3.7 million in government wage subsidies which offset reported expenses versus none in Q3 2021."1 In Q4, the Company's target remains to achieve double digit year-over-year growth in gross profit, with seasonality expected to remain consistent with historical periods with Q2 and Q4 being the Company's largest quarters. Combined with anticipated strong cash flow generation, the Company expects to enter 2022 in a strong financial position. The Company also reiterated its financial outlook for 2022 today, remaining on track to realize the anticipated net benefits of Project Monarch, driven primarily by top line gross profit enhancements. The Company's immediate focus going forward is on continued execution, investments in sales enablement resources and additional account executives, and realizing the full benefits from Project Monarch to accelerate our growth and margins. Financial Summary1
* Adjusted EBITDA is not adjusted to subtract funds received under the Canada Emergency Wage Subsidy ("CEWS") program provided by the federal government of Canada and therefore reflects the lower operating costs resulting from the CEWS payments, including $3.7 million in Q3 2020 and YTD 2020 (and $10.3 million in Q4 2020) compared to nil in Q3 2021 and $0.7 million in YTD 2021. Financial Position The Company is in strong financial condition, including a $275 million revolving credit facility, with approximately $106.1 million in loans and borrowings outstanding at September 30, 2021. Including internally generated cash flows, the Company anticipates having significant resources with which to pursue growth opportunities. Net debt, equating to loans and borrowings plus lease liabilities less cash-on-hand, was $127.8 million at September 30, 2021 compared to $190.6 million at December 31, 2020, with the decline driven by proceeds from the IPO as well as net cash flows from operating activities in the nine months ended September 30, 2021. The ratio of net debt to Adjusted EBITDA over the last twelve months was 1.9x at September 30, 2021 compared to 2.9x at December 31, 2020. Dividend Softchoice anticipates paying quarterly cash dividends of approximately C$0.07 per Common Share. The Company's next cash dividend, which will be for the period from October 1, 2021 to December 31, 2021, is expected to be paid on or about January 14, 2022 to shareholders of record on December 31, 2021. Our Outlook 1 Softchoice reiterated its 2022 financial outlook that was included in its Prospectus (as defined below). For full-year 2022, the Company is expecting:
Our outlook is based on certain assumptions and factors (including those relating to our view of the drivers of, and expectations related to, our anticipated growth), including the key assumptions and factors set out in the Prospectus under 'Our Outlook'. For important information on risk factors, refer to "Forward Looking Information Disclaimer" later in this news release. Quarterly Conference Call Softchoice's management team will hold a conference call to discuss our Q3 2021 results today, November 12, 2021, at 8:30 a.m. ET.
DATE: Friday, November 12, 2021
A link to the webcast will also be available on the Events page of the Investors section of Softchoice's website at http://investors.softchoice.com. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast. An archived replay of the webcast will be available for 90 days. Capitalized Terms Capitalized terms used in this release, including Project Monarch, and terms we use to describe our IT solution types including Software & Cloud, Services, and Hardware and sales channels including SMB, Commercial, and Enterprise are described in the Company's Management's Discussion and Analysis of Financial Condition and Results of Operations for the three and nine-months ended September 30, 2021 (the "Q3 2021 MD&A"), and/or defined in the Company's final initial public offering prospectus dated May 26, 2021 (the "Prospectus") filed on SEDAR and available on the Company's investor relations website http://investors.softchoice.com. 1 Non-IFRS Measures This news release makes reference to certain non-IFRS measures and other measures. These measures are not recognized measures under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. We use non-IFRS measures, including "Adjusted EBITDA", "Adjusted EBITDA as a Percentage of Gross Profit", "Adjusted Cash Operating Expenses", "Adjusted Net Income (Loss)", "Adjusted EPS", "Adjusted Free Cash Flow Conversion", and "Gross Sales". These non-IFRS measures and other measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Our management uses these non-IFRS measures and other measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. We also believe that securities analysts, investors and other interested parties frequently use certain of these non-IFRS measures and other measures in the evaluation of issuers. As required by Canadian securities laws, we reconcile the non-IFRS measures to the most comparable IFRS measures. For more information on non-IFRS measures and other measures, see the Q3 2021 MD&A filed on SEDAR and available on the Company's investor relations website http://investors.softchoice.com Reconciliations of Non-IFRS Financial Measures
Notes (Refer to the Q3 2021 MD&A for description of the bolded items and sections with parentheses within these Notes)
1 Forward-Looking Statements This news release contains "forward-looking information" within the meaning of applicable securities laws in Canada. Forward-looking information may relate to our future business, financial outlook and anticipated events or results and may include information regarding our financial position, business strategy, growth strategies, addressable markets, budgets, operations, financial results, taxes, dividend policy, plans and objectives. Particularly, information regarding our expectations of future results, performance, achievements, prospects or opportunities or the markets in which we operate is forward-looking information. In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "financial outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved". In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding possible future events or circumstances. Forward-looking information may include, among other things: (i) the Company's expectations regarding its financial performance, including among others, net sales, gross profit, expenses, Adjusted EBITDA, Adjusted Free Cash Flow Conversion and operations; (ii) the Company's expectations regarding industry trends, growth of our addressable market, overall market growth rates and our growth rates and growth strategies; (iii) our ability to maintain a highly predictable and visible net sales outlook; (iv) our business plans and strategies; (v) the continued success of our commercial model; (vi) our expectations regarding growth in our customer base, our ability to retain customers and increase margin per customer; (vii) acceleration in growth of and adoption of new technologies; (viii) our relationship with our technology partners; (ix) our ability to continue to attract and retain talent; (x) our competitive position in our industry; (xi) our intention to declare dividends; (xii) and the long-term impact of COVID-19 on our business, financial position, results of operations and/or cash flows. Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as at the date such statements are made, and are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the risk factors described in our Q2 2021 MD&A and under "Risk Factors" within the Prospectus. A copy of the Prospectus can be accessed under our profile on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and on our website at investors.softchoice.com. There can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information, which speaks only as at the date made. About Softchoice Softchoice (TSX: SFTC) is a software-focused IT solutions provider that equips organizations to be agile and innovative, and for their people to be engaged, connected and creative at work. That means moving them to the cloud, helping them build the workplace of tomorrow, and enabling them to make smarter decisions about their technology portfolio. For more information, please visit www.softchoice.com.
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